Form 3468, Investment Credit: Rehabilitation and Energy Credits

Form 3468 is the IRS form you file to claim the Investment Tax Credit, a set of federal incentives that can offset 6 to 30 percent (or more, with bonus adders) of what you spend on qualifying energy property or on rehabilitating a certified historic building. The form feeds into Form 3800, which decides how much of the credit you can actually use against your tax bill this year. Getting it right comes down to three questions: which credit type applies, what percentage you qualify for, and whether you can hold the property long enough to avoid paying the credit back.

What Form 3468 Claims

The Investment Tax Credit is not one incentive. It is an umbrella for several credits, each authorized by a different Internal Revenue Code section, all claimed through the same form. Form 3468 currently handles six categories:

Rehabilitation Credit (Section 47), for renovating certified historic structures.
Energy Credit (Section 48), for renewable energy property such as solar, geothermal, fuel cells, and storage.
Clean Electricity Investment Credit (Section 48E), a technology-neutral credit for zero-emission electricity generation and storage placed in service after 2024.
Qualifying Advanced Coal Project Credit.
Qualifying Gasification Project Credit.
Qualifying Advanced Energy Project Credit, for manufacturing facilities producing clean energy components.

The rehabilitation and energy credits account for the great majority of Form 3468 filings. The coal, gasification, and advanced energy project credits run through competitive allocation programs with statutory caps and rarely appear on ordinary returns.¹

The Rehabilitation Credit

The rehabilitation credit under IRC Section 47 rewards investment in preserving historic buildings. After the Tax Cuts and Jobs Act of 2017, the credit applies only to certified historic structures. The old 10 percent credit for non-historic buildings placed in service before 1936 was repealed.²

What Counts as a Certified Historic Structure

A certified historic structure is a building either listed in the National Register of Historic Places or located in a registered historic district and certified by the Secretary of the Interior as historically significant to that district. If your building falls into the second category, file an application with the National Park Service and secure certification before claiming the credit.³

The Substantial Rehabilitation Test

Small touch-ups do not qualify. Your qualified rehabilitation expenditures during a 24-month measuring period must exceed the greater of $5,000 or your adjusted basis in the building and its structural components. Larger phased projects can use a 60-month measuring period if written architectural plans describing all phases exist before work starts.⁴

Only costs tied directly to the rehabilitation count. The purchase price of the building is excluded, as is any enlargement. What counts: structural improvements, mechanical system upgrades, interior finishing, and similar capitalized work.

Rate and Timing

The credit equals 20 percent of your qualified rehabilitation expenditures, but you do not take it all at once. Since the TCJA, the credit is spread ratably over five years starting in the year the building is placed in service. You claim one-fifth (effectively 4 percent of expenditures) each year for five consecutive years.²

NPS Part 3 certification confirming that the work meets the Secretary of the Interior’s Standards for Rehabilitation is required before you can claim the credit. Keep a copy with your tax records.

The Energy Credit

The energy credit under IRC Section 48 provides a percentage credit on the cost of eligible renewable energy property you place in service. A wide range of technologies qualifies, and the applicable percentage depends on whether you meet Inflation Reduction Act labor rules.

Eligible Property

The following types of property qualify for the Section 48 energy credit:⁵

Solar energy property that generates electricity, heats or cools a building, or provides hot water (swimming pool heaters are excluded).
Geothermal energy property and heat pumps.
Qualified fuel cell property.
Qualified small wind energy property.
Energy storage technology with a capacity of at least 5 kilowatt-hours.
Qualified biogas property producing gas that is at least 52 percent methane, captured for sale or productive use.
Combined heat and power systems.
Waste energy recovery property.
Microgrid controllers.
Qualified microturbine property.

To qualify, property must be depreciable, used in a trade or business or held for the production of income, and either constructed by you or acquired new so its original use begins with you. Property used predominantly outside the United States or by a tax-exempt organization generally does not qualify, though tax-exempt entities may claim direct pay instead.³

6 Percent or 30 Percent

The energy credit has a two-tier structure. The base rate is 6 percent of eligible basis. If your project meets the prevailing wage and apprenticeship requirements, the rate jumps to 30 percent.⁶

Two categories of projects automatically qualify for the higher rate without meeting the labor requirements: facilities with a maximum net output under 1 megawatt, and facilities where construction began before January 29, 2023. Everyone else must satisfy both conditions:

All laborers and mechanics performing construction, alteration, or repair must be paid at least the prevailing wage rate the Department of Labor sets for their geographic area and trade.
A required percentage of total labor hours must be performed by apprentices from registered apprenticeship programs.

Falling short on wages is curable but expensive. You must pay each underpaid worker the shortfall plus interest, along with a $5,000 penalty per affected worker. If the IRS finds intentional disregard, the penalty rises to $10,000 per worker and you owe three times the underpayment.

Section 48E for Facilities Placed in Service After 2024

For facilities placed in service after December 31, 2024, a technology-neutral version of the energy credit under Section 48E applies to any electricity-generating facility or energy storage technology with a greenhouse gas emissions rate of zero or less. It uses the same 6 percent base and 30 percent bonus structure and appears in Part V of Form 3468. For most solar and wind projects starting construction now, Section 48E is the relevant credit rather than Section 48.

An important deadline is on the calendar. Solar and wind facilities that begin construction after July 4, 2026, will not qualify for Section 48E credits if placed in service after December 31, 2027.⁷ If you are planning a solar or wind installation, the construction-start date matters.

Bonus Adders That Stack on Top

Three additional adders can lift the energy credit rate further. Each has its own qualification rules, and they can stack.

Domestic Content

Meet domestic content thresholds for U.S.-manufactured steel, iron, and components and you can add 10 percentage points to your credit rate, assuming you also meet the prevailing wage and apprenticeship requirements or qualify for an exception. Projects that meet the domestic content standard but not the labor requirements get a smaller 2-percentage-point increase.⁸

Energy Community

Projects located in energy communities can add another 10 percentage points. An energy community includes brownfield sites, areas with significant fossil fuel employment, and census tracts where a coal mine has closed since 1999 or a coal-fired power plant has closed since 2009. At least 50 percent of the project’s nameplate capacity must sit within the energy community, and eligibility is tested on the date the project is placed in service.

Low-Income Community

Facilities with a maximum net output under 5 megawatts can qualify for a low-income community bonus. Facilities in low-income communities or on Indian land get a 10-percentage-point increase. Facilities that are part of a qualified low-income residential building project or provide direct economic benefit to low-income households get 20 points. The bonus is allocated through a competitive application program with limited annual capacity.⁹

Calculating the Credit and Adjusting Your Basis

Your credit is a percentage of the eligible basis in the property. For energy property, that is the full cost of the equipment placed in service, including amounts properly capitalized, reduced by any portion funded through subsidized energy financing such as tax-exempt bond proceeds or government grants. For rehabilitation, eligible basis is your qualified rehabilitation expenditures during the measuring period, excluding acquisition and enlargement costs.³

Energy property with a maximum net output of 5 megawatts or less can also include qualified interconnection costs (the cost of connecting to the electrical grid) in the credit basis.

After calculating the credit, you reduce the depreciable basis of the property so you are not both getting a credit and depreciating the same dollars. The reduction differs by credit type:

Rehabilitation credit: reduce the building’s depreciable basis by the full amount of the credit determined for the tax year.
Energy credit and clean electricity investment credit: reduce the property’s depreciable basis by 50 percent of the credit determined.

Spend $1 million on solar equipment and claim a $300,000 energy credit at the 30 percent rate, and your depreciable basis drops by $150,000, to $850,000. Spend $500,000 on a historic rehabilitation and take a $100,000 credit, and depreciable basis drops by the full $100,000, to $400,000.¹⁰

Direct Pay and Credit Transfers

Not every taxpayer has enough tax liability to use the credit. Two mechanisms exist.

Under IRC Section 6417, tax-exempt organizations, state and local governments, tribal governments, rural electric cooperatives, and similar entities can elect to receive the investment credit as a direct payment from the IRS. This election opened clean energy economics to nonprofits and public entities that were previously shut out of the credit.¹¹

For-profit businesses that cannot fully use their credits can sell all or part of an eligible credit to an unrelated third party under IRC Section 6418. The buyer pays cash for the credit, that cash is not taxable income to the seller, and the buyer claims the credit on their own return. Buyer and seller cannot be related parties. The transfer election is irrevocable, and a purchased credit cannot be re-transferred.¹² For partnerships and S corporations, the transfer election is made at the entity level.

Both elections require online pre-filing registration through the IRS Energy Credits Online portal. Register each credit property, receive a registration number, and include that number on your tax return. Registration must happen at least 120 days before the due date (including extensions) of the return on which you report the credit.¹¹

Recapture Within Five Years

Claiming the credit is a five-year commitment. Sell, give away, or convert the property to personal use before that window closes, and you owe some of the credit back. The recapture percentage drops by 20 points for each full year you hold the property:¹³

Less than one full year: 100 percent recapture.
One full year: 80 percent.
Two full years: 60 percent.
Three full years: 40 percent.
Four full years: 20 percent.
Five or more full years: none.

For the rehabilitation credit, common triggers include selling the building, converting it from business to personal use, or making changes that cause it to lose historic certification. For energy property, disposing of the equipment or taking it out of active business use triggers the same graduated payback. When recapture hits energy property, depreciable basis increases by 50 percent of the recapture amount, mirroring the original 50 percent reduction.¹⁰

How the Credit Reaches Your Tax Bill

The investment credit does not reduce your tax dollar-for-dollar without limit. It flows into the General Business Credit on Form 3800, which caps the total business credits you can use in any year. The cap is your net income tax minus the greater of your tentative minimum tax or 25 percent of your net regular tax liability above $25,000.¹⁴

Unused credit carries back one year and then forward up to 20 years, so a small current-year tax bill does not cost you the credit.¹⁵

Filling Out the Form

Form 3468 is organized into seven parts. Complete Part I with information about the qualified property or facility, then fill in the part that matches your credit type: Part VI for the Section 48 energy credit, Part V for the Section 48E clean electricity investment credit, and Part VII for the rehabilitation credit. If you are claiming credits for multiple properties, file a separate Form 3468 for each one.³

Credit amounts from Form 3468 flow to Form 3800, which aggregates all your business credits and applies the statutory limit. The allowable credit from Form 3800 then transfers to your main tax return: for individuals, Schedule 3 (Form 1040), line 6a; for corporations, the appropriate line on Form 1120.¹⁶

Records to Keep

Retain detailed records of every cost in your credit basis: contracts, invoices, proof of payment, and any certifications. For historic rehabilitation projects, keep the Part 3 NPS certification confirming that the completed work meets the Secretary of the Interior’s Standards. For energy property, keep manufacturer specifications, proof of placed-in-service dates, and prevailing wage compliance records. Because the five-year recapture window lets the IRS revisit the claim years later, hold these records at least three years past the end of that period.

1
Internal Revenue Service. About Form 3468, Investment Credit
2
Office of the Law Revision Counsel. 26 U.S. Code 47 – Rehabilitation Credit
3
Internal Revenue Service. 2025 Instructions for Form 3468
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Internal Revenue Service. Rehabilitation Credit (Historic Preservation) FAQs
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Internal Revenue Service. Publication 6045 – Energy Incentive Tax Credits
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Internal Revenue Service. Prevailing Wage and Apprenticeship Requirements
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Internal Revenue Service. Sections 45Y and 48E Beginning of Construction Notice
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Internal Revenue Service. Domestic Content Bonus Credit
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Internal Revenue Service. Clean Electricity Low-Income Communities Bonus Credit Amount Program
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Office of the Law Revision Counsel. 26 U.S. Code 50 – Other Special Rules
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Internal Revenue Service. Register for Elective Payment or Transfer of Credits
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Office of the Law Revision Counsel. 26 U.S. Code 6418 – Transfer of Certain Credits
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Internal Revenue Service. Rehabilitation Credit Recapture
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Office of the Law Revision Counsel. 26 U.S. Code 38 – General Business Credit
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Office of the Law Revision Counsel. 26 U.S. Code 39 – Carryback and Carryforward of Unused Credits
16
Internal Revenue Service. Schedule 3 (Form 1040) – Additional Credits and Payments